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I often say that the greatest mechanism of social service, of improving the lives of
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other people, is free markets.
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Think about what happens in a market, now everyone has needs, those needs can be fulfilled
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by others either out of benevolence or out of self-interest.
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Now benevolence cannot be relied upon, but self-interest always can.
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Let's say you are a greedy person, you are a sociopath who doesn't care about other
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In a free market the only way you can make money and fulfill your own needs is by fulfilling
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someone else's need by making them better off.
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Remember every transaction in a free market is a positive sum game, both people who transact
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are better off or they would not transact in the first place.
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So the only way you can make money for yourself is by adding value to somebody's life.
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Markets are the mechanism that enable people to help themselves by helping others first.
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The beauty and elegance of this is quite mind-blowing and it also stands to reason therefore that
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the more someone messes with this mechanism, the more someone gets in the way, the more
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harm they cause to society.
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Remember the crux of markets, the reason they exist is a value that someone is trying to
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add to the life of another human being.
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Nothing should be allowed to get in the way of that.
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Welcome to the Seen and the Unseen.
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Our weekly podcast on economics, politics and behavioral science.
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Please welcome your host, Amit Padma.
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Welcome to the Seen and the Unseen.
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Before we begin this episode, a word from our sponsors of this episode, which actually
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demonstrates a point I was making about markets.
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Well, with this model, in addition to what these artists might get for selling their
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And after all of this, after the consumer and the artist benefit, after the company
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And now on with this episode.
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My guest today is the economist Anupam Manoor, who works as a fellow at the Takshashila Institution
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And we're going to talk about protectionism, a tendency that should really have died out
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by this time in the 21st century, but is actually to my utter bewilderment on the rise.
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Here's a conversation I had with Anupam.
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Anupam, welcome to the scene in The Unseen.
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It's an absolute pleasure to be here.
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Anupam, tell me something.
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Is protectionism on the rise worldwide?
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The short answer is yes.
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It is definitely on the rise.
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There's various data points that kind of confirm this, especially in the big advanced economies
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Protectionism is on the rise.
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And as it often does, it started with the economic downturn.
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So historically, protectionism always raises its ugly head when you have a decline in income
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And this is exactly what has happened since 2008.
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Because in different countries, you have people saying that, you know, hey, what's the use
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of trade if people at home, you know, middle class workers are losing their jobs, our incomes
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And the intuitive thing is to sort of blame the foreigner in terms of whether trade or
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whether immigration and ask for cut downs on those.
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And that's kind of why Donald Trump also is such a big protectionist.
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So you see the kind of parallel trend in politics and in economics.
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So you have the entire political rhetoric, which I don't want to get into.
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And then you have actual trade policy and so on, which has been geared towards more
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inward looking sort of policies, right.
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So for example, I mean, let me just throw this stat at you that in the EU since 2008,
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almost half, which is about 49 percent of all trade policies have been kind of harmful
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And in the US, there's been about 1297 economic precise economic policies which are actually
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harmful to trade as against 206 policies which have been helpful to trade.
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So this just kind of gives you an idea.
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And you will stop the list, by the way, in the world over.
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And this is happening in India as well.
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India actually is second in the world with a net kind of harmful protectionist measures
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And there's a common belief among people that hey, protectionism is good because one, it
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supports local producers and therefore there are local jobs and, you know, so on and so
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So what you're going to do in this episode is you're going to break down eight myths
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So let's start with myth number one.
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So one of the most I mean, and I'm going to start brushing with as broad a stroke as possible.
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The first popular myth is that protectionism is good for the economy, right.
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And that kind of breaks down when you start looking at the various seen and unseen effect.
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And I'm going to use the title of your show here.
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I mean, we're all inspired by that.
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So it essentially any kind of protectionism will start.
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Firstly, it might have a few good short term effects, which is obviously why it's so popular.
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But in the medium to long run, it obviously harms the producers, the consumers and overall
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kind of jobs scenario and so on.
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And ultimately, it starts hurting economic growth.
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For example, just again, another statistic is that an increase of $1 in tariff revenue
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can result in as much as a $2.16 fall in overall world exports and about a $0.73 drop in world
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So that's looking at as broad a stroke as possible.
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But even if you look at country level, because there can always be an argument saying, OK,
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it can be bad for the world.
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But it can be good for my country.
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That is, again, gone because a $1 increase in tariff revenue for each country leads to
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about $0.66 decrease in overall GDP.
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So that kind of tells you that right at the beginning that protectionism harms the economy.
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So let's try to illustrate that with a hypothetical example.
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Let's say that I manufacture mobile phones.
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But no one's buying my mobile phones because better phones are coming from China and Asia
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And I'm like, no, I'm the local industry.
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I'll provide local jobs.
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I want the government to protect me.
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And so I pay off my local congressmen or my whatever.
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And they say, OK, Amit, we'll have a law that protects you and that leads to local jobs.
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And they pass, let's say, 200% tariffs on foreign phones, which make me competitive.
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And now people start buying my phones.
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And I am a local manufacturer.
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I'm paying taxes in the economy.
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And I'm employing people.
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What's the unseen here?
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It's really utopian in nature, right?
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But if you break it down and if you look at the unseen effect, what actually happens is
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that immediately when once an industry gets protection, they no longer have any incentives
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to be productive or to increase productivity, to innovate, to expand, and generally be competitive
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in the marketplace, right?
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Because now you're no longer under threat.
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You tend to take things a bit more lax.
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That's the first kind of an incentive structure, how it plays out.
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Right, also now because you have no kind of protection, basically your profit margins
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and so on would be much higher than what it would normally be.
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So domestic prices go up.
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And now the consumers no longer have a choice of cheaper kind of import goods, right?
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So you no longer also have, I mean, that choice is removed as well.
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So what you'd end up with is much higher domestic prices, an industry which is not competitive
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So there's no way that that industry can actually go out and export to the world market, right?
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If you had let it be, then this probably industry could have, you know, the good ones at least
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could have competed with the world market, grown and actually bought an export revenue.
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But that's not happening anymore.
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So the firm stays small, barely manages to kind of meet local demand and at much higher
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An example of this comes from my childhood as I grew up in the 1980s.
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And you know, you had one telecom company in the country that effectively, which was
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MTNL, which was a government company.
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Now, leave aside that it was a government company, but it was a protected marketplace.
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And what that did was that if you wanted a telephone, there was a seven year waiting
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And today it's no longer a protected marketplace.
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You have all kinds of foreign players in the market and you can get a mobile phone in five
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minutes with all kinds of freebies and incentives for the consumer attached.
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And people often don't see the consumer point of view of this, that let's say that I am
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buying a mobile phone today for 3000 rupees.
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But because you have these protectionist measures, I have the local guy, Amit Verma mobile phones,
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which are available to me for 10,000.
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Now that's 7,000 rupees that I would notionally be saving if I bought the foreign product.
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If I had saved that, I would have also spent it in the local economy only.
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I would have bought other things for it.
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The money would have gone out into the economy, provided other jobs, which it is not providing
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now and that's the unseen effect.
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And far too often, I think, and this is an unfortunate aspect of this, is that you only
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look at the kind of specific sector that you're trying to save, which is more often than not
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in terms of protectionism is the producer.
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But you completely ignore the kind of effect that it has on the consumer.
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And as you said, the kind of consumer surplus is almost diminished when you bring in protectionism
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and which, you know, when translated into reality means that they no longer have that
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kind of extra disposable income that they would have had if you had cheaper alternatives.
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So the amount of money that they would have spent on other things obviously reduces.
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And that has a dual effect.
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One effect is that because of the incentives that you spoke about, the local company doesn't
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have the incentive to innovate.
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And the other effect that it has is when the consumer would spend this money out in the
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marketplace that would increase the effect for others to also innovate wherever they
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were spending their money.
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So overall innovation goes down across the board.
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Yeah, innovation goes down, lots of inefficiencies creep in, overall productivity decreases.
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And obviously all of this will have kind of a staggering effect on economic growth, right?
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Let's move on to your second myth.
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The second myth is that protectionism should be removed only if it is reciprocated from
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So what you mean by this is that let's say we have a tariff on products from China and
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they have a tariff on products for India.
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And the argument then goes that, hey, we should only remove our tariff on them if they remove
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Because if not, you would feel completely cheated.
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And especially again, your producers would feel cheated that, you know, we are not able
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to compete in the marketplace in China.
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Why are we allowing Chinese producers to compete here?
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So what's your response to this?
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The response is actually that just unilateral reduction in trade barriers can have a huge
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kind of impact on your economy, a positive impact on your economy.
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Again, going back to this similar thread that we caught off in the previous myth is that
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by reducing your trade barriers, what you essentially do is that you are making your
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domestic firms a lot more competitive.
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They are actually pressurizing them to innovate, to sustain themselves, to stay in the market
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for as long as possible and so on.
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And that has positive knock on effects on the entire economy.
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But the other kind of curious thing that happens is that if you unilaterally decrease your
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trade barrier, then the let's say the exporters in China would now suddenly want to take a
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And one of the ways to take advantage of that is by having easier imports.
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So for example, again, if China wants to export mobile phones to India, they'd also want kind
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of software and that they import, let's say from India, right?
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So then they would create a lobby and they would force the Chinese government to reduce
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the import tariffs on software, right?
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So in this way, unilateral reduction in trade barriers always leads to kind of the reciprocal
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So the later on, even if it didn't happen, it would be fine because people are benefiting.
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Your consumers benefit.
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And that's like the largest majority of this thing, right?
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I mean, India, 73% of the GDP or so comes from consumption, you know, so just by that
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But let me also, again, throw another stat at you.
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There was a study conducted of five big economies in the world, and out of which, as a result
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of, you know, unilateral trade liberalization, and these were unique cases where they just
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said we're going to remove all our trade barriers in respect to what the rest of the world does.
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And this is, let's say, Singapore, Hong Kong, UAE, Chile, and Thailand.
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And it was found that just this unilateral trade liberalization led to, you know, expansion
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of 22 times of GDP for Singapore, 8 to 12 times for the other countries.
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And this was over a span of 35 years.
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Of course, it's a long period, but 22 times.
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The figures are still staggering.
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And one thing people often don't realize is that countries don't trade with other countries.
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Individuals trade with individuals.
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And now every trade is a positive sum game.
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Two people trade with each other only because both of them benefit.
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And the extent to which you get in their way is the extent to which you reduce the benefit
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So a government is actually harming its citizens every time, produces friction in between a
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transaction between any two consenting individuals, and therefore when the government has a trade
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barrier in place between, say, you, the consumer in India and me, the producer in China, it's
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not that it's harming me, it's harming you as well.
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I think this approach towards trade, that it's not a zero sum game, is something that
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the policymakers across the world don't see at all.
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I mean, they tend to think of trade as a positive, I mean, as a zero sum game, that, you know,
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if we are reducing our import tariffs, then we are actually helping someone else at the
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But it's often not the case.
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I mean, consumers always look out for the best deal.
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And importing isn't just, you know, your standard buying, but it's just from a foreigner.
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So you know, consumers always look for a good deal and they want to buy from the place which
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gives them the best deal.
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So you're actually helping the consumer by not interfering with this at all.
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You're helping the consumer find a great deal.
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Let's move on to the third myth.
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The third myth is that protectionism increases saving and investment in the economy.
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So the corollary is that free trade would actually harm your saving and investment cycle
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And basis of that is that by having no kind of restrictions on import, consumers would
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just go mad and buy everything from the world just because they can.
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And again, this is a very, very stupid argument in its essence, right?
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Because as I said, consumers would buy only if they have the money and if they want it
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and if the price is right, they just, you know, and it's the same as buying domestically
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or from internationally.
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And in the same way, I mean, every consumer has a set of incentives and a certain set
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of, you know, planning that they do for their own personal income.
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So they'll spend as much as they can, they'll save as much as they can, and so on.
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So if a country as a whole is spending more than it is saving, then the problem is not
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The problem is with the domestic financial sector and so on and so forth, right?
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So actually, increasing trade barriers or decreasing trade barriers have absolutely
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no effect on your saving and investment cycle.
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In fact, what I would argue is that it makes the situation worse because if you're putting
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up trade barriers and if you're forcing your consumers to spend more on, you know, costlier
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products in the economy, then that means that you're essentially taking away that extra
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bit of disposable income that they perhaps could have saved.
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Saved or spent somewhere.
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And the myth like that, the way you articulated it, also condescends to consumers.
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They assume that you're like sheep who don't know what they're doing and can't take rational
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decisions in their own interest, while the fact of the matter is that every consumer,
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you know, we're using that general term, but every consumer is basically you and me.
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You're perfectly capable of making decisions in our own interest.
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We should have the right to do so.
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And the government job is to get out of the way so that we have as many choices available
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And again, if what the government has to look at and far more often than not, if there is
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actually depletion of savings and investment means that your domestic kind of, you know,
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financial sector is not doing all right, that there are no proper avenues for saving or
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there's no proper avenues for investment, which is why people tend to just consume the
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entire amount that they get because they don't have any trust in the economy to do well in
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And honestly, if you just enable a free market and you don't put entry barriers and even
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the domestic finance sector would respond to the demand and the problem won't arise
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Let's move on to myth number four.
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So myth number four is that protectionism will improve trade balance.
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And this is something that, you know, politicians and policymakers in whatever level of capacity
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that they understand, somehow care a lot about, though they, you know, my intuitive guess
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is that they really don't understand a lot about balance of payment statistics and how
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But having a negative, you know, or a trade deficit with another country, and especially
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if it is, you know, in not very favorable terms in the geopolitical space is seen as
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And let's take the example of India and China.
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You would remember that, you know, there were calls for banning of imports from China because
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of that India has a huge trade deficit with China.
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And this is, again, a phenomenon that has absorbed the world over.
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US lawmakers have forever been asking for protection against Japanese imports.
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And that's because they believe that US runs a huge trade deficit against Japan.
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And that can't be good for their kind of relative economic power.
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But honestly, again, it has nothing to do with trade barriers.
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But it's to do with what each country has a comparative advantage in.
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So, India might actually be better off just importing a lot of things from China than
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trying to, you know, manufacture it domestically because China obviously has a comparative
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advantage in the manufacturing sector, right?
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So we're just probably better off importing those things and allocating our scarce resources
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towards something else that we're good at and then trying to export that to the world,
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But in order to, you know, no single time in the history of, you know, at least a counted
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world do we have a situation where trade barriers has actually gone on to improve a country's
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Always, we find that the negative is the opposite is true.
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And even if that wasn't the case, why should it matter if you have a trade deficit?
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Like I remember this very old column by Tim Halford, I think more than a decade ago,
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but a memorable one where he pointed out that, look, you probably have a trade deficit with
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You buy her services, but she buys nothing from you.
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And this is a trade deficit that is perpetual and keeps growing.
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Yeah, I couldn't have put it better, but there's, there's been this kind of alarmist viewpoint
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about trade deficit in the world.
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And I don't know why, because people are not as concerned about fiscal deficit, for example,
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the layman at least, but somehow trade deficit get, people get really touchy and emotional
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And it should be the other way around.
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But yeah, in the US, especially you've had a concern about US trade deficit with Japan
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before and now with China and they've been called for protectionist measures.
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Let's move on to point number five.
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What's myth number five about protectionism?
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The fifth popular myth regarding protectionism is that it will help create jobs in your domestic
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And I know we touched upon this separately, but again, it's one of the things that's been
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used over and again by world leaders for instituting any kind of trade barriers.
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I mean, again, back to the simple example, if instead of buying a mobile phone for 3000
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and buying it for 10,000, that 7,000 surplus I would otherwise have had would have gone
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into the economy and created productive jobs.
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That's no longer happening because all of that money is going to the producer in question
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who probably has a much bigger profit margin and might well be paying his workers less.
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So it's a complete myth.
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It works the other way.
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It works the other way.
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So this is especially true in, you know, industries which have linkages, forward and backward
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So I think one of the most favored kind of industry in the world for protecting is the
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But actually no other kind of policy move makes more harm than trying to protect the
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steel industry because let's say you slap import duty on steel so that you can help
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your domestic steel producers.
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And of course, the number of people involved currently in a job in one of these steel firms.
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But what you end up doing is that again, you raise the prices of steel, et cetera, et cetera,
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and basically it becomes uncompetitive and so on.
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And now let's say automobiles, which actually hires a lot more people now are no longer
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competitive because it has to buy expensive steel from your domestic manufacturers.
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Now your automobile industry will lose out and the number of people there who are currently
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employed may start losing their jobs.
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So in terms of net effect on jobs, it's definitely negative.
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So what the initial scene effect is that, hey, you're protecting some jobs in the steel
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industry, but the unseen effect is that, hey, because the price of steel goes up, you are
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actually either losing jobs in the automobile industry or jobs that would otherwise have
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been there because of the growth are not coming about.
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And that in turn reduces the demand for steel and could eventually end up hurting jobs.
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So what this does is just as trade is a positive sum game, this kind of protectionism becomes
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a negative sum game where both players lose out.
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And it's just not that to add one extra layer to that by providing, let's say protectionism
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to the incumbent, he gets the kind of perfect conditions for creating a sort of monopoly
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or oligopoly with the few existing ones.
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And there's no way a new entrant can come in.
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So under normal circumstances, you know, if there is normal profits, you would have new
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entrant coming into the steel industry who would hire a lot more, which again is vanished
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now because of the protectionism.
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So it has the opposite impact to what the myth would suggest it does.
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Let's move on to myth number six.
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So the myth number six is that protectionism saves the economy from dumping.
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And let's just look at what dumping means, which is, I mean, there's no universally kind
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of agreed definition of what dumping is, but largely it would be that if another country
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is exporting its products to you at extremely low rates, which is deemed to be unfair and
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we look at what unfair is later on, but it's exporting at unfair prices, which is lower
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than what it's selling at its domestic market.
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So that is generally called dumping.
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So basically it wants to capture your market, even if it undergoes a loss for the time period
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so that it can have a monopoly later on.
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Give me an illustrative example of this.
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So let's take the example of China and India again.
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If China is exporting, let's say alarm clocks to India, and it is selling at $10 in China
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for, you know, a piece, and then it's selling the same alarm clock at $5 in India, then
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that is considered to be dumping because now the Chinese producer there is willing to take
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a hit on its profit margin so that it can actually conquer the market here.
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And this is frowned upon in all kinds of policy circles and as well as by the way, WTO and
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And one can see why, because the logical thing that you think here is that, Hey, you know,
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they are dumping their goods here and because of that local alarm clock manufacturers are
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Now, again, there's a couple of ways to look at this.
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Now one, your local alarm clock manufacturers might never be that good and they might, you
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know, not really survive this onslaught.
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But then your consumers are getting, you know, alarm clocks at $5 instead of the $10, which
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they would have otherwise paid.
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So it's great for the consumers.
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Now you have to look at the net kind of benefit sometimes, you know, the kind of gain to consumers
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can outweigh the loss from the producers.
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But even then it would be deemed as, you know, unfair and it's fair to think of it that way.
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Now the problem is that you also, this is going into technical definitions, right?
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It looks at what the cost of production is and if it sells at, you know, a price lower
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than the cost of production, the problem, and this is even, let's say in a market as
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analytically rigorous and regulatory, which has got sound regulatory principles like the
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US, they talk about cost of production, but don't mention whether it's total cost, whether
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it's marginal cost, whether it's average cost.
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And I've looked at the definition of dumping in according to the US rule book, which is
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So that's the problem with the definition.
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But let's look at what happens in reality.
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In the US, what you would have is you'd have a local producer who would go up to the regulator
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and says, listen, I think I'm being shortchanged here because I'm losing out on the competition
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because another country is kind of, you know, dumping and it would have to file a suit,
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you know, formal complaint of sorts.
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And then the Ministry of Commerce or Department of Commerce would actually take a look at
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And there's another body which also takes a look at it.
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Now, both of them come at some kind of subjective discretion, you know, and subjective and a
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discretionary kind of judgment on whether dumping has happened or not.
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And far more often than not, what it is, is that the lobbying would take over and then
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declare something as dumping.
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And that would lead to slapping off, you know, import duty on whatever is being dumped.
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So this is what actually takes place in reality.
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And because of the kind of nebulous definitions, lack of clear procedure or laws relating to
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dumping, you have countries all over the world when they don't like, you know, some kind
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of imports and the domestic producers getting hurt, they just say this is dumping.
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And then the WTO can't do anything about it because, you know, according to the WTO rules,
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you can take protective measures against dumping.
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To just go back to that fundamental point, I'd say that, hey, you know, why is dumping
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used in a pejorative sense?
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If a guy in China is manufacturing alarm clocks for $6 and selling them to me at five, I am
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Your local consumer is benefiting.
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Let the Chinese guy take the hit.
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And this is if you kind of want to broaden the horizon, this is the same kind of argument
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I'm making against, you know, predatory pricing and so on.
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If Uber wants to spend a lot of its VC money and give me extremely cheap rides, I'm very
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I don't see why I should complain against that at all.
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If something, you know, if someone wants to give me something for free or at extremely
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And I think at the heart of this is a fundamental misunderstanding about markets.
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I call, you know, people privilege producers so much, which of course it would because
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producers are the ones who are the special interest groups who are funding all politics.
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But the truth is the consumer is at the heart of all markets.
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I regard free markets as a greatest form of social service because what does a market
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It satisfies the needs of people.
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Free trade is satisfying someone's needs.
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If you just put the consumer, the heart at all of your policy and cater to getting the
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greatest benefit out to consumers as as possible, then all of these things wouldn't be taboos.
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The dumping, bring it on, bro.
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The entire approach towards policymaking would change.
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I mean, not just, you know, international trade policy and so on, but yeah, domestic
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The entire thing would change.
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And as to how you'd look at it, absolutely, I agree with you on that one.
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But let's get to the heart of this anti-dumping kind of stance.
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A lot of the anti-dumping measures are actually done as an equalizer of or to create a level
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So that goes against the very nature of why people trade.
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People trade because of comparative advantage.
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Now, you have something that I want and I have something that you want and thus it's
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beneficial for us to trade.
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But if you want to create that level playing field saying, you know, Amit, I'm going to
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give you exactly the same resources and Anupama, I'm going to give you the exactly same resources.
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And then what is our incentive to trade at all?
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That sounds like a crazy dystopia because then all positive sum games, which is to say
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all trades stop and we stop benefiting.
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I mean, here's the thing.
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Trade happens because two people value two things separately.
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So when I buy a cup of coffee from you, let's say your Starbucks, I buy a cup of coffee
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I value the coffee more than the 180 rupees I'm paying for it.
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You can make out I buy it all Americanos.
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And you value the 180 rupees more than the cup of coffee.
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And if you want a level playing field, then, you know, we eventually move to a sort of
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socialist dystopia where you don't get my money and I don't get your coffee and we're
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both worse off than we're both worse off.
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So that is where anti dumping kind of thinking comes from.
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And it's bizarre for me.
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So let's move on to the next myth then, myth number seven, myth number seven, which is
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protectionism will help your infant industries.
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And by Joe, I think this is again a big one, but let's try and keep it brief.
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The thinking behind this is that there are certain industries which have or even certain
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firms which are just starting off in your economy and you see great potential of good
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that the firm will do in the future.
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And thus you want to kind of protect it now, because if you expose it to the evil kind
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of international traders, then it will get completely decimated and you will lose out.
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So to go back to our earlier hypothetical example, I start making mobile phones.
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I am a infant industry, but at the start when I'm on my learning curve, I can't compete
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with the Chinese and American giants unless you put tariffs on them.
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So I have sales and I have the space to grow.
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And one day I become a giant myself.
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And once you become a giant, then you can come, you know, lower the trade barriers,
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though, by the way, that's never happened in the world.
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So that's the infant industry argument.
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But I think the same set of arguments that we've been talking about apply here.
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The minute you kind of protect an industry, it loses all the incentive to grow and to
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compete in the marketplace.
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And we've seen this the world over.
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But again, if you want to take India as an example, we did this from 1950s onwards until
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We protected all our industries from the outside world.
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And in fact, we even protected certain domestic industries from other domestic industries.
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In fact, they started under Nehru and the term people use for it, import substitution.
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So the whole thinking was that, OK, so instead of importing all of this, let's divert our
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resources and try to build these things ourselves.
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And then these industries will grow and then can compete in the marketplace.
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None of that has happened.
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And again, the same kind of thinking, as I said, applies in the domestic industry.
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So you want to kind of delegate a certain set of jobs for small industries.
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You want a certain set of tasks and a certain set of products for micro industries and so
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on and protect them from the bigger industries.
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All sorts of protectionism of the sort has not worked.
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And I doubt it will ever work because, again, the incentives to kind of grow and compete
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in the marketplace will not be there.
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And irrespective of how much you protect it, you will always end up with an infant.
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So this kind of protectionism or using tax policy to protect or using import duties to
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protect it, it's more like putting an industry on ventilator, right?
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It's not sustainable in the long run.
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It's just about, you know, you can save it for a day or two or probably years in terms
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of an economy's lifespan, but definitely not sustainable in the long run.
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What strikes me as particularly perverse about this is that while the intention is good,
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both the scene effect and the unseen effect are bad.
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The scene effect is that the infant industry remains an infant on ventilator, as you so
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eloquently put it, and doesn't grow at all because the incentives are all messed up.
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And the unseen effect, what we don't see is that the value that the consumer would have
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saved, they would have spent that on something.
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And that would have given rise to more infant industries which would have grown.
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And we don't see any of that.
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And the other common analogy used here is that, you know, there are infants and there
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Infants actually grow up and become really big someday and can do a lot of product.
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But here we turn our infants into dwarfs.
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We turn our infants into dwarfs.
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They'll always remain short, which means that they'll never grow.
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And this is seen in kind of India's manufacturing sector.
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You have this massive missing middle, right?
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Because we always keep protecting our small industries.
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We never actually allow them to grow.
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And we, of course, I don't want to get into labor laws and, you know, all the allied factors,
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but the when you look at it, you are not giving any kind of incentives for the small industries
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to grow up and become the big industry that you would always hope.
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And because we force our infants to be dwarfs and because we have that missing middle, that's
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a big part of the jobs crisis that we face currently in India today.
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You know, we talk about, hey, you know, there is this big jobs crisis.
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What do we do about it?
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But the causes for it are something that have been coming down the line for 60 years and
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And no government has ever taken the right stand on this.
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No, I think it's too courageous a move to, you know, use as minister this thing.
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It just seen as too courageous.
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So even in 91, when we liberalized, we liberalized parts of trade and so on.
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But there are, you know, factor markets that we didn't touch at all.
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But I think we are digressing far too much.
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And partly because partly because they're so unintuitive that, you know, voters understand
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Voters see the world in an intuitive, zero sum kind of way.
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And to talk about, you know, the positive sumness of trade or removing, you know, all
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of this is very unintuitive in a sense.
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All the myths that you are talking about today are things that you would naturally intuitively
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And you know, and you have to fight hard to get past the thinking on that.
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Let's move on to myth number eight.
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So myth number eight and the final myth here is that protectionism is necessary for developing
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And this is a very peculiar charge that's put up that, you know, the reason why, let's
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say the WTO or even sometimes, you know, IMF World Bank and the big institutions or even
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the U.S. pushes for removal of trade barriers is that it actually helps the developed countries
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while it completely harms the developing countries.
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Now, you know, my one kind of simple argument against this is that just as there is no kind
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of Indian physics as against, you know, U.S. physics, there is no Indian economics and
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The principles of trade and principles of economics is exactly the same, whether it's
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for developing countries or developed countries.
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I mean, it's a positive sum game everywhere, everywhere.
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So just just that is, you know, the kind of starting point.
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But again, we can look at certain data which which is done by, you know, I mean, of course,
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conspiracy theorists will cry foul.
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But again, I've got some data by a study done by World Bank.
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And it says that, you know, by reducing kind of your trade barriers and going towards liberalization
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of in the goods and services market would help, you know, average real incomes in developed
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countries increase by point seven six percent.
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But it will help developing economies increase the real incomes by one point three percent
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So it actually shows that developing economies have a lot more to gain than developed economies.
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I mean, everybody gains from trade, but developing economies gain more so because you can leverage
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the comparative advantage that much precisely.
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And again, another small data point is that newly developing economies.
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And these are newly industrializing economies that have just kind of come on the scene.
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They tend to gain as much as three to six percent of GDP year on year by liberalizing
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So the kind of data is out there, but because it's unintuitive to kind of understand this
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and it's easy to cry foul saying that, you know, the developed world wants this so that
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they can dump their goods onto us and kill our infant industries.
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It's very hard for people to see it this way.
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And that kind of rhetoric is very popular.
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I mean, I think you've pretty much covered all the myths that I can think of regarding
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protectionism and and still the fallacies persist.
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Oh, that is a very difficult answer for me to.
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I mean, you know, for me to address, but I honestly wouldn't know because I think most
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of these myths, as you rightly said, they're intuitive to understand.
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And this is the same thing with any other kind of economic policies.
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Why are price controls so popular?
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Because on the face of it, it seems that this is something good for me.
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As a consumer, let's say you would be happy with the price control in the beginning because
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you don't firstly have the vision for long term, you know, to see what would happen in
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But you can see immediately that the amount you're spending decreases.
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So you're immediately happy.
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But then, you know, economics tells you that there are lots of unintended price controls
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always lead to shortages and which perpetuate themselves for the long term.
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But I think one essential thing here is that that short and long term kind of dichotomy
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I think most of these things would kind of lead to some kind of positive effect in the
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If you protect the steel industry for the next two years, it might actually grow.
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And then politicians would happily say that, listen, this is because of my trade policy.
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I bought this about and it saved the kind of jobs that would have probably gone out
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if you had let the industry die.
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But then again, again, you know, who has the capacity to think and analyze and see for
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the next 10 years what's going to happen to the entire steel industry and how many.
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And it's also easier to kind of look at the factual than the counterfactual.
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Because most of these arguments are counterfactual in nature.
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You know, if you hadn't done that, you could probably generate 10x more jobs in the future.
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How can people believe that?
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And also politicians are focused on the short terms as always in election around the corner.
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So it's much easier to sort of tout either an intended benefit or even sometimes a short
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term scene effect and say that, hey, you know, this is what I have done.
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And politicians don't care about what happens 10, 15 years down the line that someone else's
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You know, so this has been a great episode, a great conversation where you've brought
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forth a number of economic reasonings against protectionism.
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All of those seem completely flawless and have absolutely no holes as far as I can see.
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I want to end with making a moral case.
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I think there are lots of people who would agree that what two consenting adults do with
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each other is their business.
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No one should interfere.
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They would certainly agree, especially a lot of left liberals would agree when this is
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in a private domain, you know, two consenting adults in their bedroom, they can do whatever
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they want in our daily interactions, we can do whatever they want.
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But when it comes to trade, suddenly we come up with all these fallacious series and we
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say that, no, we should interfere.
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And no, I think if it is immoral in the first case to interfere, it is immoral in every
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Consenting adults interact with each other because both of them benefit in various ways,
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which includes financial ways in the marketplace.
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Individuals trade with each other, countries don't.
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We should never forget that.
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I think even before all of these eight myths, though, your point is probably the first amongst
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If economic freedom should be kind of attractive in and of its own right, a moral imperative.
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Anupam, thanks so much for being on the show.
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I've learned so much from you today.
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If you enjoyed this episode, you can follow Anupam on Twitter at Anupam Malur.
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You can follow me at Amit Verma.
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Archival's episode of the Scene and the Unseen are available at sceneunseen.in.
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Thank you for listening.
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The Scene and the Unseen is co-produced by Indus Vox Media Podcasts and you can check
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out other IVM Podcast shows on the Rapper website, especially a new one called Akansha
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Hosted by Akansha Srivastava, this show discusses cybercrimes and how to make the internet a
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For one, you can stop browsing and start listening.
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It's out every Thursday.
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You can see more of her species on ivmpodcasts.com, your one stop destination where you can check
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out the coolest Indian podcasts.
